Best of the Week
Most Popular
1.U.S. Housing Bull Market Over? House Prices Trend Forecast Current State - Nadeem_Walayat
2.The Coming U.S. Economic Collapse Will Trigger a Revolution - Harry_Dent
3. Stock Market Crash a Historical Pattern? - Wim_Grommen
4.Global Panic - U.S. Federal Government Stockpiling Ammo – Here’s What We’re Going to Do - Shah Gilani
5.AI, Robotics, and the Future of Jobs - Aaron Smith
6.This is Your Economic Recovery With and Without Drugs - James_Quinn
7.Gold and Silver Price Getting Set To Explode Higher - Austin_Galt
8.The Something for Nothing Society - Lifecycle of Bureaucracy - Ty_Andros
9.Another Interesting Stock Market Juncture - Tony_Caldaro
10.Inflation vs the Deflationary Straw Man - Gary_Tanashian
Last 5 days
The Ultimate Demise Of The Euro Union - 1st Sep 14
Palladium Price Breaks Multi-Year High Over $900 - 1st Sep 14
When Complexity Becomes Chaos - 1st Sep 14
Designer War By Default - 1st Sep 14
Islamic State or Russia? Ten Key Questions Towards Pragmatism - 1st Sep 14
Mixed Emotions for the Gold Market - 1st Sep 14
These Clowns Are Dragging Us Into War with Russia - 1st Sep 14
Marx And The Capitalist Cancer Of Overproduction - 1st Sep 14
Scottish Banks Salivating at the Prospects for an Independent Scotland of 6 Million Debt Slaves - 1st Sep 14
Small Man Europe Is Now In “Effective State Of War” With Russia - 31st Aug 14
The Unintended Blowback Of False Flags - 31st Aug 14
Tesco Supermarket Death Spiral Latest Profits Warning and Dividend Slashed - 31st Aug 14
Dow, Gold and Silver - A Last Stand, A Fake Out And A Surge - 31st Aug 14
If U.S. Consumers are so Confident Why aren't They Spending? - 31st Aug 14
Scotland Independence House Prices Crash, Deflationary Debt Death Spiral - 31st Aug 14
Obama’s “Catastrophic Defeat” in Ukraine - 30th Aug 14
Stock Market Inflection Point Approaching - 30th Aug 14
Gold And Silver - Elite's NWO Losing Traction. Expect More War - 30th Aug 14
Corporations Join Droves of Americans Renouncing US Citizenship - 30th Aug 14
Peter Schiff U.S. Housing Market, House Prices Bubble Warning - 30th Aug 14
Russia, Ukraine War - It’s Time to Play the “Gazprom Card” - 29th Aug 14
The One Tech Stock Investment You Should Never Sell - 29th Aug 14
Bitcoin Price $500 as Current Downside Barrier - 29th Aug 14
Don't Get Ruined by These 10 Popular Stock Market Investment Myths - 29th Aug 14
Low Cost Transcontinental Gold - 29th Aug 14
Gold Bullish Central Banks Should Give Money Directly To The People - Helicopter Janet? - 29th Aug 14
US House Prices Bull Market Over? Trend Forecast Video - 29th Aug 14
The Fed Meeting at Jackson Hole Exposed Yellen’s Greatest Weakness - 29th Aug 14
AAPL Apple Stock About To Get sMACked - 29th Aug 14
A History of Unlimited Money: Learn From It or Repeat Its Mistakes - 29th Aug 14
How You Can Play to Win When Market Makers Are Calling the Shots - 28th Aug 14
EU Gas Supply Is In Real And Imminent Danger - 28th Aug 14
Central Banks at the Root of Evil - 28th Aug 14
European Bond Market: Bubble of all Bubbles! - 28th Aug 14
Employers Aren’t Just Whining: The “Skills Gap” Is Real - 28th Aug 14
The ISIS Menace - Just What We Need, Another War - 27th Aug 14
The Risky Business of Methane-Rich “Fire Ice” - 27th Aug 14
CFR Recommends Policy Shift that is Very Bullish for Gold - 27th Aug 14
Ukraine Standoff Signals Global Power Shift - 27th Aug 14
Stock Market Panic Decline Begins - 27th Aug 14
The Monopoly of the Government Education Cartel - 27th Aug 14
How to Invest in Silver Today for Double-Digit Gains - 27th Aug 14
The Big Solar Energy Breakthrough We've Been Waiting For - 27th Aug 14
U.S. Empire’s Bumpy Ride - 27th Aug 14
Gold Market and the Interest Rate Trap - 27th Aug 14
Stock Market Staring Into the Great Abyss - 27th Aug 14
A Look at the Coming 30-year Inflation Cycle - 27th Aug 14
Forex Trading - Will USD/CHF Rally Above 0.9200? - 27th Aug 14
Europe’s Depressing Economy Dog Days of Summer - 27th Aug 14
How The Coming Silver Price Bubble Will Develop - 26th Aug 14
A Nation of Shopkeepers - Supply-Side (Voodoo) Economics? - 26th Aug 14
Stock Market Bear Tracks Abound In Wall Street - 26th Aug 14
65,000 U.S. Marines Hold up a Mirror to the Economy - 26th Aug 14
Bitcoin Market Provides Clues for Investors - 26th Aug 14
The Key to Trading Success - 26th Aug 14
Will The US Succeed in Breaking Russia to Maintain Dollar Hegemony?... - 26th Aug 14
Even Mainstream Academia Worried about Massive Bubbles in Markets - 26th Aug 14
Iraq and Syria Follow Lebanon's Precedent - 26th Aug 14
Colonization by Bankruptcy: The High-stakes Chess Match for Argentina - 26th Aug 14
Dow Stock Index On The Cusp - 26th Aug 14
Prohibition Laws and Agency Regulations - 26th Aug 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Biggest lie in Stock Market History Revealed

How Will I Know When To Sell My Gold?

Commodities / Gold and Silver 2013 Dec 06, 2012 - 12:59 PM GMT

By: DeviantInvestor

Commodities

NEVER sell your gold because you want to hold it for the rest of your life and pass it on to your grandchildren.

Or

Sell your gold NOW (big mistake – my opinion) if you believe that gold is in a bubble or never should have been bought (as per “gold-bashers” Warren Buffett and Charlie Munger).


Most of us will sell sometime between now and never. What is an objective method to determine when to sell?

Technical ratios at which it might be sensible to sell some of your gold

Sell some gold when the gold to silver ratio drops down to around 15 to 1. The gold to silver ratio is currently about 51 to 1. When gold and silver prices have both risen beyond all typical expectations, the ratio will probably drop to between 10 and 20 to 1. The ratio was about 17 to 1 at the bubble peak in 1980.

Sell some gold when the Dow Jones Industrial Average (DOW) ratio to gold (DOW/Gold) has dropped to near 1 to 1. The ratio is currently about 7.5 to 1. The ratio could reach 1 to 1, for example, if the Dow were priced at 10,000 and gold was selling for $10,000 per ounce. At the peak of the 1980 gold bubble, the ratio was approximately 1 to 1.

Sell some gold when the gold to crude oil ratio rises to perhaps 30 to 1. For example, if crude oil is priced at $300 per barrel and gold is priced at $9,000, that is a 30 to 1 ratio. In 1980 the peak ratio was about 25 to 1.

Sell some gold when you can pay off the entire mortgage on your house with 10 to 20 ounces of gold.

(I suggest you only sell “some” of your gold, not all of it, because it is always a good idea to keep some “real money” and not be utterly dependent upon unbacked paper currency.)

Sentiment-based timing to consider selling gold

Sell some gold when the “money honeys” on financial TV are running one story per hour on the rapidly rising price of gold.

Sell some gold when Time magazine posts a picture of gold bars on their cover with a caption “The new bull market in gold.”

Sell some gold when your hairdresser/barber gushes about the gold she/he just bought and how it is sure to triple in price soon.

Sell some gold when there are lines of people waiting at coin shops to buy gold.

Sell some gold when people finally realize that “money (unbacked paper money) is accepted only because money is accepted,” and people have become reluctant to accept paper money.

Sell some gold when people have realized that money only has value because people have faith in its value, and people have finally lost faith in unbacked paper money.

Additional thoughts: Jim Sinclair suggests that, regarding gold, people should “buy fish lines and sell rhino horns.” Stated another way, when the price has collapsed in a price spike down (looks like a fish line extending downward from a fishing pole) then we should buy. But if the price has risen in a parabolic pattern (looks like a rhino horn), then it is time to sell a portion and wait for the correction. If the price has fallen too for, too fast, and there is no fundamental reason for the price collapse, buy more. If the price has rapidly rallied to new highs far beyond expectations, then it has moved too far, too fast. Those markets rallies, whether in gold, silver, the NASDAQ, crude oil, or real estate, always seem to correct in a crash. Examples include Gold and Silver in early 1980, the Nikkei 225 in 1990, and the NASDAQ in early 2000. It seems likely that gold and silver will go into a parabolic rise within a few years unless the money printing ceases – and we should plan on the money printing continuing for a LONG time.

The common denominators are the human emotions of fear and greed. In simple terms, greed drives the market to new highs and fear causes the crash. People were “getting rich quick” when the NASDAQ rallied from about 1,100 to about 5,000 in less than 2 years – when greed had the upper hand. But when the NASDAQ reached a natural stopping point, fear took over and people sold in panic or to preserve what value remained. If they did not sell and rode the market all the way down, they lost a significant portion of their investment and paper profits. Fear caused people to sell, which created more fear and selling, and the waterfall decline fed upon itself until the sellers were exhausted.

Similarly, in 2008, when gold had collapsed from over $1,000 to under $700 (the price today is about $1,700) in seven months, most amateur investors were reluctant to buy because they were fearful that the price of gold would decline further. Professionals buy the bottoms and sell the tops. Fearful amateurs sell down into the bottoms and then buy back near the tops when greed takes over.

If you bought gold, which is currently in a long-term uptrend, then waiting will eventually bring success, even if you purchased at a temporary top. However, if you were buying Enron Stock some years ago, then waiting only magnified the disastrous investment. Study the fundamentals of your investments until you understand the differences.

When will gold reach $4,000?

The Bottom Line: Buy when the “blood is running in the streets,” and sell when everyone else wants to buy. Use ratios from other markets as objective measures to indicate probable price extremes in markets. We can seldom pick the precise bottoms and tops, but we can carefully observe while others are being swept along by their own fears and greed. If we can keep our heads while others are losing theirs and make sound decisions based on numbers, analysis, and comparison ratios to other markets, we can make intelligent and informed buy and sell decisions. For now, it makes sense to me to hold gold and silver and to carefully evaluate everything else. Massive and supposedly unexpected changes can occur with surprising rapidity. Check here for additional commentary

GE Christenson
aka Deviant Investor

If you would like to be updated on new blog posts, please subscribe to my RSS Feed or e-mail

© 2012 Copyright Deviant Investor - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

massxrateoftruth
08 Dec 12, 10:04
Question about technical ratios

Ratio of silver to gold:

In what year does the historical ratio start?

What degree are these ratios relevant?

-Understanding that a percentage of people make decisions reguarding the price in which one buys or sells when squeezing value? Or with day trading swings within applicable ranges? These are the only logical applications to historical ratios I, individually, can think of.

I understand many purposes become associated with the varying personalities buying and selling gold.

Looking at the 'purpose' gold has 'served,' suits my personality the best.

For an individual investor, "Never" seems the most appropriate.

For the one that knows the hours of boredom and moments of terror, ratios seem relevant.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014